Fiji's National Budget for 2017/18 which was delivered last month set out the Government’s intentions, priorities and new policy initiatives for the coming year. The theme followed from previous budgets – to empower Fijians in order to unlock Fiji’s economic potential. Overall, the budget was celebrated, as it delivered pay increases for civil servants of up to 79% as well as an increase in the tax threshold to F$30,000, meaning a bigger take home pay for many.
Education was one of the top priority areas, alongside significant increases in health, infrastructure, civil service reform and a notable allocation towards climate change adaptation and mitigation projects following Fiji's presidency over the upcoming 23rd Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 23).
Net deficit will more than double from F$208.9m in 2016/2017 to F$499.5m in the coming year. This was, however, mainly attributed to the rollover of some capital expenditure from the previous year.
Growth forecasts were revised indicating a growth of 2.0% in 2016 going on to 3.8% in 2017 and 3.0% in 2018. Operating budget to capital expenditure ratio has remained around the same levels as budgeted for the previous years.
Some concerns were expressed around the growing national debt and increasing net deficit, particularly in light of forecasted revenue not being met if the projected sale of assets fails to materialise in the coming year.
Direct and Indirect Changes
Government Assisted Projects
All cooperatives that receive assistance from the Government for any project will be granted an income tax exemption for five years, in line with existing renewable energy incentives.
Electric Vehicle Charging Station Incentive
The minimum investment requirements in place have been reduced from $3 million to $500,000. The subsidy structure under the package will be amended to just a one-tier subsidy rate of 5% of the investment level.
Film-making and Audio-Visual Incentives
Amendments have been made in relation to Qualifying Fiji Production Expenditure on a film.
Residential Housing Development Package Regulations 2016
This will be amended to provide clarification on ceiling on the sale price of residential housing so that it becomes affordable to potential average Fijian home buyers. There will be an introduction of an additional incentive to include investors who may partner with the Government to provide affordable housing.
Hotel investment incentives
This will be amended to give CEO FRCA the powers to grant Provisional Approvals.
Section 102 of Income Tax Act will be amended to strengthen Anti-Avoidance Provisions by removing the requirement for a "main" or "dominant" tax avoidance purposes. This section will be invoked as long as one of the purposes of the scheme is tax avoidance.
Tax Free Regions and Commercial Agriculture and Agro-Processing Incentives
Extended for another ten years from 2018 to 2028 with the bio-fuel incentives and investment requirement restructured.
Other changes that might interest you
- Recovery of PAYE short deductions made by employers will be the responsibility of the employer.
- The Tax Administration Act will be amended to allow prosecution of an offence under a tax law to be not limited to 7 years from commission of the offence. This effectively removes the time bar for prosecuting any tax matters.
- Search warrants can now be executed by tax officers when required and all tax and customs penalties will now be amended to a maximum of $25,000 and maximum of 10 years imprisonment where they are below these levels.
- There is now an extension of amnesty (no tax and no penalties) for declaration of foreign assets and income from 30 June to 31 December 2017.
- For those importing in to the country, be aware that going forward the Customs Act will be amended to shift the burden of proof to importers for any proceedings under that Act (for example, an incorrect valuation or classification). It also amends the record keeping period from 5 years to 7 years and removes the time bar to allow prosecution beyond 7 years for any offence.
- Exchange Control: Limits delegated to commercial banks will now include advance import payments of up to $2 million per invoice as opposed to $1 million previously. Limits have also been extended for subscriptions up to $20,000 per annum and wages paid in foreign currency to foreign crew from $500 to $10,000 from $500 per beneficiary.
- Cooperatives that receive assistance from Government for any project for example, localised hydro power stations, will be granted income tax exemptions for 5 years, in line with existing renewable energy incentives.
Summary of movements in Duty
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